The Morning Risk Report: Antibribery Program Is Seen as Model

The U.S. Justice Department offers leniency to companies that disclose bribery, cooperate with investigators and strengthen their compliance programs. The principles underpinning that approach could apply in other cases as well, a department official said.

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Good morning. The principles underpinning a U.S. Justice Department policy for fighting bribery—offering leniency in exchange for cooperation and efforts to improve compliance—offer an approach worth following in other enforcement efforts, a senior DOJ official said.

The Foreign Corrupt Practices Act Corporate Enforcement Program was unveiled by the Justice Department in November. It offers a “presumption” that, absent aggravating circumstances, the DOJ won’t prosecute companies if they voluntarily disclose bribery, cooperate with investigators and improve their compliance programs. Companies must surrender any money gained from their wrongdoing.

“While the FCPA Corporate Enforcement Policy only applies in the FCPA context, we intend to embrace, where appropriate, a similar approach and similar principles—rewarding voluntary self-disclosure, full cooperation, and timely and appropriate remediation—in other contexts,” John Cronan, acting assistant attorney general in the department’s criminal division, told a conference in San Diego on Thursday.

The FCPA bars bribing foreign officials to get or keep a business advantage.

The policy is a revised version of a pilot program that the department rolled out in April 2016. A DOJ official said in November the program showed measurable success in bringing companies to the table, citing 22 voluntary disclosures of potential FCPA violations in the pilot’s first year, compared with 13 the previous year.

Mr. Cronan’s willingness to take a similar approach may raise the chances companies could avoid prosecution outside of bribery matters, lawyers said.

“It would make me more hopeful we could get to the right place ultimately, but it’s still fraught with risk,” given prosecutors’ discretion in how they handle cases, said Zane Memeger, a former U.S. attorney in Philadelphia who now works in the white-collar crime practice at Morgan, Lewis & Bockius LLP.

The more uncertainty remains regarding what the Justice Department might do, the less likely companies are to turn themselves in, said Robert Luskin, a partner at Paul Hastings LLP who focuses on the FCPA. “The point of the program is a commitment,” he said.

Correction: “It would make me more hopeful we could get to the right place ultimately, but it’s still fraught with risk,” Zane Memeger said regarding the potential impact of the Justice Department applying its leniency policy more broadly. An earlier version of this article incorrectly quoted Mr. Memeger as saying, “It would make me more hopeful if I could get to the right place ultimately, but it’s still fraught with risk.”

EXCLUSIVE ON RISK AND COMPLIANCE JOURNAL

U.K. shuts down brokerage amid U.S. charges. U.K. regulators placed a London brokerage into administration following U.S. charges that the firm and several of its executives engaged in fraud and money laundering.

Beaufort Securities Ltd., along with its Mauritius-based management company and several investment managers, engaged in various schemes to defraud investors and launder money, including pump-and-dump trades on 10 U.S. publicly traded stocks, U.S. prosecutors alleged in an indictment unsealed Thursday. The trades resulted in more than $50 million in proceeds for their clients, U.S. prosecutors alleged. The Securities and Exchange Commission also filed a complaint.

Arvisingh Canaye, a Mauritius-based general manager for the brokerage, was ordered held without bail following his arraignment Friday afternoon. His attorney declined to comment.

The U.K. Financial Conduct Authority said Friday it appointed three administrators to take over the firm, which it placed into insolvency. The brokerage was also ordered to cease all trading activity.

Companies get new tools to fight whistleblower claims. Companies now have a better chance of quickly fighting back claims they defrauded the U.S. government, defense lawyers say. Justice Department officials have issued two memos this year making it more likely that such fraud cases will be scuttled.

COMPLIANCE

U.S. orders delay of Qualcomm vote. The U.S. government ordered Qualcomm Inc. to delay a shareholder meeting this week to give it more time to review Broadcom’s proposed takeover of the chip maker. The intervention, which Broadcom said Qualcomm requested, will delay a vote on whether to replace six Qualcomm directors with nominees put forward by Broadcom, the WSJ reports. The Committee on Foreign Investment in the U.S. will review the deal.

Paul Jacobs, executive chairman of Qualcomm Inc., is trying to fend off a bid from Broadcom.

Bloomberg News

Ex-president at Vatican bank is indicted. Vatican prosecutors have indicted a former president of the Vatican bank, Angelo Caloia, and his lawyer, Gabriele Liuzzo, alleging embezzlement and money laundering, the latest move in a long-term cleanup of the historically scandal-plagued institution. Mr. Caloia didn’t reply to a request for comment, while attempts to reach Mr. Liuzzo were unsuccessful, the WSJ reports.

DATA SECURITY

Firms sharpen cyber due diligence. Companies are intensifying due diligence of acquisition targets to avoid costly cybersecurity surprises, particularly when intellectual property, such as software code or customer data drive the deal, the WSJ reports. Scrutiny will continue as merger and acquisition activity heats up on expectations of extra cash from lower corporate tax rates.

GOVERNANCE

BlackRock presses companies over guns.BlackRock went public with the questions that it is asking gun makers and sellers in the wake of the school shooting in Parkland, Fla., an unusual step by the world’s largest money manager by assets. BlackRock said it can’t dictate what a company can do, but warned it generally has the ability to vote against individual directors or in favor of shareholder proposals, the WSJ reports.

RISK

Kim Jong Un holds meeting with South.Kim Jong Un hosted a high-level South Korean political delegation for dinner on Monday evening in Pyongyang, South Korea’s first known meeting with the North’s leader. It was the second interaction between the Kim family and officials from Seoul in as many months, as the two Koreas push forward with a rapprochement around the Winter Olympics, the WSJ reports.

North Korean leader Kim Jong Un is shown in Pyongyang, in a photo released in August.

KCNA/REUTERS

Political paralysis in Italy. Italy entered a period of political instability on Monday after national elections boosted populists but failed to produce a winner with enough support to patch together a parliamentary majority. The antiestablishment 5 Star Movement was projected to win 32% of the vote—exceeding expectations and emerging as Italy’s largest party, the WSJ reports.

Trump administration fights pressure on tariffs.Trump administration officials are pushing back against overseas officials opposed to planned steel and aluminum tariffs and U.S. executives who warn the move could undermine a strengthening American economy, the WSJ reports.

Trump threatens tariffs on European cars. President Donald Trump upped the ante in a brewing trade conflict stirred up by his announcement of steel and aluminum tariffs, saying on Saturday the U.S. would impose tariffs on European car exports if the bloc follows through with retaliation against his metals duties, the WSJ reports.

Road clears for a Merkel chancellorship.Germany’s center-left Social Democratic Party voted on Sunday to join a grand coalition with Angela Merkel’s conservatives, clearing the way for her to become chancellor for a fourth time. Close aides to Ms. Merkel say this term will be her last, the WSJ reports.

OPERATIONS

U.S. storm leaves thousands without power.Utility crews in the U.S. Northeast and Mid-Atlantic states raced to restore power Sunday for at least 750,000 customers as a strong storm subsided and moved off the coast. Fight and transit service had mostly returned to normal, the WSJ reports.

STRATEGY

AXA to buy XL Group. French financial giant AXA on Monday said it would buy New York-listed insurance company XL Group Ltd. for $15.3 billion, creating one of the world’s biggest property and casualty insurers. The deal marks another step in AXA’s plan to cut its exposure to financial markets and focus more on insurance, the WSJ reports.

Ride-sharing startups battle in Softbank ‘family.’SoftBank Group has poured some $20 billion into ride-sharing companies, including Uber Technologies Inc. Now, those companies are spending at least some of SoftBank’s money to battle each other. SoftBank’s goal is to have the startups it invests in help each other, the WSJ reports.

Masayoshi Son, chief executive officer of SoftBank Group Corp., wants the ride-sharing companies the firm invests in to cooperate.

Tomohiro Ohsumi/Bloomberg News

The Morning Risk Report from WSJ’s Risk & Compliance Journal cues up the most important news in risk and compliance every weekday morning. Send tips, suggestions and complaints to henry.cutter@wsj.com.

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